Private pension wealth most significant asset in high-net-worth divorces

New research into the breakdown of assets of divorcing couples with net financial wealth of £1million or more has revealed that private pensions make up 43 per cent of the total assets.

The research by Succession Wealth involved analysis of the Office for National Statistics’ Wealth and Assets Survey data and figures on divorce in England and Wales. It used that information to estimate the breakdown of assets that made up the total wealth of couples going through a divorce who had a net financial wealth of at least £1million, which they estimate will be the case in 550 divorces this year. Those 550 couples will have on average assets totalling £3.48 million, and the research looked at how that was divided across financial wealth, property wealth, physical wealth and private pension wealth, with the results as follows:

• 5 per cent – Physical wealth (Non-property physical assets such as cars etc)
• 20 per cent – Financial wealth (cash, savings, shares etc)
• 31 per cent – Property wealth (Houses, land, other buildings etc)
• 43 per cent – Private pension wealth

Private pensions pose a number of difficulties in a divorce. They are not the most visible asset, and it will often take a very open and transparent spouse or a forensic accountant to get to a full understanding of its worth.

Furthermore, once the value is established there are three main ways to go about dividing a private pension asset between parties – pension sharing orders, pension attachment orders or offsetting against other assets. In the latter the pension holder gets to keep the pension in its entirety but will have to hand over another asset or combination of assets that match the value the other spouse would be entitled to if the pension was divided between them.

Which option to choose for dividing private pension wealth will very much depend on the circumstances of the case, and in particular what other assets are available. To give some indication of how often financial remedy orders are sought in respect of pensions, Ministry of Justice figures for the last quarter of 2018 show that there were 2,602 pension sharing orders and 941 pension attachment orders in that 3 month period.

Anyone considering a separation or who is already in the process of a divorce should be very careful not to overlook any private pensions, and should take expert legal advice from divorce solicitors with experience of dealing with asset splits in high net financial wealth divorces.

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